Daimler summoned by German government over diesel emissions

Daimler confirmed that several of its representatives are attending a special hearing on Thursday afternoon. Photo: Reuters

Berlin/Munich: The German government summoned Daimler AG executives to Berlin to explain the carmaker’s role in possible diesel-emissions cheating after two engines used in Mercedes-Benz vehicles drew increased scrutiny from prosecutors.

Daimler confirmed that several of its representatives are attending a special hearing on Thursday afternoon into the diesel scandal called by the German transport ministry a day after news broke about the scope of the probe by Stuttgart investigators. Sueddeutsche Zeitung reported, citing unidentified people at the ministry, that the country’s automotive regulator will test the company’s vehicles for potential emissions-manipulating software. Daimler spokesman Hendrik Sackmann declined to comment on the report immediately, while the ministry didn’t immediately respond to emails seeking comment.

A person familiar with the investigation said Thursday that, according to the warrant authorizing searches at Daimler sites in May, prosecutors focused on two diesel motors allegedly equipped with so-called defeat devices that would reduce emissions controls. The Mercedes GLK 250 and GL 350 sport-utility vehicles are among models at the carmaker that use the engines. The probe is looking into sales from 2008 to 2016, said the person, who asked not to be identified discussing an ongoing investigation.

The Stuttgart-based maker of Mercedes-Benz luxury cars is one of a number of auto manufacturers targeted in a technology scandal that’s enveloped the industry since Volkswagen AG revealed in September 2015 that it installed software to bypass pollution rules. Hundreds of police officers and prosecutors participated in the searches at Daimler sites throughout Germany in May as part of a probe opened two months earlier.

Shares decline

“Daimler appears to have taken their interpretation of what’s technically allowed on emissions treatment too far,” said Juergen Pieper, an analyst at Bankhaus Metzler in Frankfurt. “The question now is if they have broken the rules on purpose or have been bending them too far.” He estimated that any upgrade required for the cars would cost about €500 million ($570 million).

Daimler shares fell 0.5% to €65.15 euros at the close in Frankfurt, partly recovering from a drop of as much as 3%. The stock has declined 7.9% this year, valuing the automaker at €69.7 billion.

Investigators, who began looking into possible fraud and false advertising at Daimler in March, have identified two technicians at the manufacturer who are suspected of handling manipulated software that controls the engines’ exhaust, the person said. The warrant doesn’t specify the number of vehicles affected, the person said.

Jan Holzner, a spokesman at the Stuttgart prosecutors office, declined to comment on the warrant’s details, but said information about the document first published in Munich-based daily Sueddeutsche Zeitung can’t be interpreted as the probe being widened. He confirmed that two people are being investigated. Prosecutors haven’t started to review the bulk of the material seized because Daimler has filed several court suits against the searches, meaning the documents remain sealed for now.

1 million vehicles

Sueddeutsche Zeitung reported that Daimler used the two engines in more than 1 million vehicles.

Daimler spokesman Joerg Howe reiterated on Thursday that the manufacturer is cooperating fully with the investigation. He declined to comment further.

The Stuttgart raids in May also targeted material collected by lawyers at Gibson Dunn & Crutcher, according to the person familiar with the details of the investigation. Daimler had appointed the firm as its own investigator cooperating in a separate US Department of Justice (DoJ) probe into the carmaker’s diesel engines. Daimler asked a Stuttgart court to be allowed to recover that material from the hands of prosecutors, the person said.

German courts have been divided on whether items collected by law firms hired by companies to investigate independently are covered by attorney-client privilege, a rule that normally puts such material off limits. Volkswagen faces a similar situation after the Munich offices of law firm Jones Day were raided and documents seized. VW has hired Jones Day to investigate the diesel issue and report to the DoJ. VW has asked Germany’s Federal Constitutional Court to ban prosecutors from any use of material produced by Jones Day. Bloomberg